Those of us who spend too much time watching government at its dirty work know the phrase ‘statutory instrument’, or SI, rather too well. Oddly enough, they are not tools for poking statues of eminent Conservatives. They are what has become more commonly known as legal instruments. New Labour of not entirely blessed memory passed 37,218 of them…usually as a means of getting something done about which they didn’t want a debate.

A few diligent MPs (David Davis is one, Frank Field another) often scan the SI lists looking for things like the reintroduction of chimney sweeps, incarceration of Tom Watson, invasion of the Planet Mars and so forth. Most of the other 618 (or so…I can’t remember these days) never bother. Everybody seems to have missed – or is happy to keep quiet about – a brand new one. A week ago today, the Coalition Government told us all very quietly indeed that it was going to revoke some parts of an ageing schedule from The Trading with the Enemy Act of September 5th 1939. The latter was passed two days after the Germans last went visiting their neighbours.

It may seem odd that the Act is still in force; but the truth is, it’s a useful thing to have on the Statute Book just in case another unpleasant European episode starts. Most of the articles about not selling battleships to Italians and sinking the French fleet have been revoked over time. But one very important one hadn’t until seven days ago. Three days later, on 25th May, it became law.

Stautory Instrument No 1367 states that ‘1. This Order may be cited as the Trading with the Enemy (Transfer of Negotiable Instruments, etc.) (Revocation) Order 2012 and comes into force on 25th May 2012. 2. The instruments specified in the Schedule are revoked.’

And it is signed by two obviously very senior Treasury bods.

If you’re beginning to notice that there are enough instruments here to supply most of the Halle Orchestra, fear not: from here on, it’s mainly revoking stuff. And the revoking means that, as of four days ago, all of us can sell or trade negotiable instruments with former enemies. There are around twenty one-time enemies listed (which tells you something about British Foreign Policy) and spookily enough, almost all of them are EU Member States.

So: what are negotiable instruments? Well, although they come in all the sizes and colours, basically NIs are funny money: that is to say, the paper with which Draghi performs bailouts, and Geithner fills bazookas. Listed under the definition I’ve found most useful so far are Bills of exchange, Promissory notes, Share warrants, Circular notes, Bearer debentures and – just to keep the reader awake – Railway Receipts.

Leaving aside receipts from the Rangoon Railway Company, they could loosely be termed ‘debt’, or even more accurately – bonds.

Now those of you who imagine the dwindling EU members in any kind of state to bail out other members actually do so with real cash readies would be in error. Every government in the world bar China and one or two others owes money bigtime. So all of us who are Brussels’ Little Helpers just issue more debt bonds in order to help fellow Sovereigns with unrepayable debt. (You can sort of see how all this nonsense got out of hand, can’t you?

In a nutshell, then, the government just revoked those parts of a 72-year-old act that forbade it from giving such NIs directly to former enemies.

And that’s what makes it potentially interesting. Because the EU (being only a current and future, rather than former, enemy) is the organisation to whom we normally chuck away hard-earned billions pointlessly donate this funny money to help out ClubMeds with an even worse funny-money habit.

Until last Friday, we couldn’t do that direct to EU States. Now we can.

What can it all mean?

It could be a smart trick to give EU States where our banks are heavily exposed this kind of paper to ensure they can then ‘pay us back’, which yes, I know is insane, but accountancy is an amazing profession…and it would stop UK plc from sinking immediately. The need to do this in the first place would arise from the ECB being insolvent at some point in time. Like next week, for example.

And if this is the reason, then I’m impressed, to be honest – because it shows somebody (probably in Threadneedle Street rather than the Draper’s gaff) is on the ball and giving this some serious thought beyond ‘contingency’ bromides.

But on the other hand – and with Homo sapiens, there are always two hands – there could be lots of other explanations. Some of the reasons could be innocent. Some of the excuses will be waiting for somebody like The Slog to spot this, so they can be churned out to the Financial Times and other challenged tabloids.

I fancy, however, that some of them are rather worrying. For example, a failure of the Euro….and Brussels then passing a statute to say we must pay up directly in NIs recognising another currency. Or even, Brussels having already warned the Treasury that they might do this.

Or perhaps, an EU member foreclosing on the money we owe them (like Germany, for example) and we – being borassic – needing the legal instrument on hand to pay them in Toytown paper.

No doubt some experts out there can come up with yet more terrifying interpretations. Perhaps the odd honest person in the BoE or the Treasury might even be happy to tell me (jawslog@gmail.com if you’re up for it, Merv) why we just did this in something of a hurry. Only, the official Treasury isn’t getting back to me at the minute. Which, to be honest, doesn’t surprise me.

Reason No. 1:
Cameron & Co can at last claim to have scrapped some of the ‘red tape’ that they promised to remove from the shoulders of British industry.

Reason No. 2
Someone has just realised that half the banks in the City of London have been ‘Trading with the Enemy’ for the last twenty years and they need to get them ‘off the hook’ before the balloon goes up and summary justice becomes the norm.

Reluctant as I am to admit this, I can’t help agreeing with John that somebody (and, yes, probably someone at the BoE, not the Dept of Usury) is actually on the ball, for a change.

The main thing this allows, as pointed out, is that it allows money (of whatever dubious provenance – but, hell, if you can get someone to take it in exchange for something worth having, it’s money!) to be funnelled directly to where the Govt (read: the City) wants it to go. Handing it to the ECB, IMF, World Bank, or whatever other spurious NGOs the UN has hidden in it’s fetid underwear drawer, doesn’t convey the right for the donor to specify exactly where the FantasyFivers actually end up.

Now, if it was ME, and I knew that I’d have no choice but to throw cash at collapsing institutions and countries if I wanted to have any trading partners left come New Year… I’d want to decide, in my own best interest, which ones. Say, for example, the ones that actually have useful industry (making leopard print neoprene bikinis is NOT a useful industry!), assets, productive land, natural resources… that kinda thing. The ones who might, someday, actually pay some of it back!

Of course, this will inevitably turn out to have been done for reasons far more sinister. Or am I just a cynic?

Was on some news clip a few weeks ago, actually. Some hack was trying to spin tales of ‘signs of recovery’ in parts of Europe. There were a gang of rather tired, depressed and somewhat angry looking women in the shot behind him rather brusquely packing the aforementioned beachwear into boxes. I couldn’t help thinking at the time that if a niche clothing factory was the best you could do as a backdrop for a ‘recovery’ then things must be even worse than they are ‘reporting’ – I use the term loosely.

Liquidity.
BoE sees the Euro crisis coming to the sterling zone soon.
With the exposure of UK banks to Club Med countries directly,
and indirectly,plus the counterparty risks.
King Canute versus a Tsunami.

I am confused. You said “Until last Friday, we couldn’t do that direct to EU States. Now we can.”
As this statute is about trading with enemies… why would it be applying to our dealings with EU states, who are clearly not enemies?

Because under this obscure act they were still defined as enemies for this purpose until last week. Clearly the private sector has been ignoring this for financial transactions for decades and the act has not been enforced.

British and American businesses were trading with Germany and the axis countries all through the last war, hidden through proxies and third parties mostly in South America of course. Where there is opportunity for profit …….

I can’t help but think there was a certain amount of hipocracy in the Act in the first place, now I come to think about it!

Surely not ‘trading with the enemy’ should also have applied to the BoE quietly settling outstanding financial affairs with the Reichsbank, by way of the BIS for pretty much the entire duration of WW-II? I even read somewhere that Churchill got wind of this and demanded an explanation. Apparently told by the BoE to wind his neck in and stay out of affairs that didn’t concern him – “YOU may be fighting a war, but this is business!” or something to that effect.

@Wood: If all our pols were made to wear those bikinis they wouldn’t be able to conceal so much – even the queen of the May. I mean, they make themselves look ridiculous anyway, what harm could it do? Ok, terrible idea, scrub it..

Must flush eyes out with battery acid… can’t stand it… just had a fleeting vision of the chubby Eton schoolboy in a mankini! NO!!!!!!!!

Thanks for that!

Though distinctive uniforms for public ‘servants’ wouldn’t be a bad idea, from the point of view of identifying them at a distance and thus having time to take appropriate action; reloading, running away, vomiting – as the situation requires.

I’d vote for a white and black stripy costume, a black eye-mask and a bag marked ‘Swag’ for the rank and file. And maybe a Jack Sparrow costume for the PM. No, scratch that; Sparrow’s too likeable. Blackbeard, maybe?

The banks are their own nation. They are not France or Germany, Italy or Greece but they are their own nation just the same. Matters of location or geography are irrelevant to their grander scheme which is the domination of us all. So far they’re doing very well at that.

Indeed! and let’s look back at who invented money and for what reason…Hmm could it have been a shyster who could not grow /produce/manufactor/ or be of any use in servitude ie a fat lazy bastard, who said “yeah do this/ that for me and I’ll give you this piece of..bronze? AND, it caught on so much he had to get people to build a safe place for people to keep this… shekel? and ‘they’ happily paid him to look after their money.

A bit off topic but very relevant generally – may be me misunderstanding but looks like Bankia and other Spanish banks sold preference shares to retail depositors – 22B worth. A huge factor in considering bank runs and confidence given the need to take losses against equity re bad loans.

That’s another banking dodge that gets my goat good and proper – preferential shares! Either you have shares in the company or you don’t. I guess it wouldn’t do for the elite to take the same haircut as the plebs, though. God knows how they’d keep up their lifestyle on 1 billion instead of 3! Greedy bast*rds!

“In a nutshell, then, the government just revoked those parts of a 72-year-old act that forbade it from giving such NIs directly to former enemies.”

I think the interpretation of this has got things backwards. The Treasury have not revoked part of the 1939 act but are exercising the powers in it.

The link to the statutory order includes details of the instruments that have been revoked. They all date to 1945 or later and concern *the sanction of* transfers of negotiable instruments to countries that were, by then, no longer enemies or occupied nations.

Please note that the schedule of instruments being revoked page links to the wrong things. If you put the appropriate date and number into the search boxes at the top you can get to what they are referring to.

Quite what this means I’m not sure. It could just be tidying up a historical artifact. It could instead be the removing of our ability to directly support other european nations. This would prevent the kind of deal HM Government made with Ireland being repeated with other nations – a closing of a potential lifeline for the smaller nations to ensure they keep looking to Brussels for salvation or simply an excuse for our Government to refuse pleas for direct support in the near future. Even more far fetched would be that it is a form of capital controls specifically to prevent transfers onto the continent.